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Should I Consolidate my Credit Card Debt?

Chris Gottschalk

Chris Gottschalk About The Author

Sep 6, 2023 4:45:00 AM

Credit card debt is at the highest point it’s ever been. Americans currently have over $1 trillion dollars in credit card debt, with the average balance being close to $6,000. Worse, credit card interest rates have skyrocketed in the past two years, and the average credit card’s rate sits at a near record of 20.53%.

If you’re one of the people who has a balance on their credit card, you’d be forgiven if the above statistics make you feel like paying off your high-interest credit card debt is almost impossible. However, the truth is that there are several methods you can use to pay off your credit card debt. One of these methods is called debt consolidation, and it offers two enormous benefits to anyone trying to pay off their credit cards.

Why should I consolidate my credit card debt?

consolidate credit card debt

What Exactly Is Debt Consolidation?

Of course, before talking about how debt consolidation can save time and money, it helps to know just what debt consolidation is. When you consolidate your debts, you take out a consolidation loan for the total amount of debt you owe and use that money to pay off all your debts. Then you repay the loan.

Most of the time, the loan you’ll use to pay off debt is an unsecured personal loan. However, some people have used a secured loan for debt consolidation, like a home equity loan, since secured loans have a lower interest rate.

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Consolidating Your Credit Card Debt Consolidation Save you Time

While you might have been making multiple payments on multiple credit card balances in the past, a debt consolidation loan condenses all your payments into one. This means you don’t have to worry about making multiple payments. Instead, you just make one convenient payment to the credit union that gave you the loan.

As an added bonus, only having to make one payment every month means you don’t have to worry about missing a payment, either. If you really want to make sure you never miss a payment, though, you might even want to use a credit union’s electronic bill pay service to make an automatic payment each month.

why consolidate credit card debt

Credit Card Debt Consolidation can Save you Money

Consolidating your debts doesn’t just save you time, though. It can also save you money. As we’ve mentioned, credit card interest rates have shot up in the past couple of years, and people can find their credit card balances exploding if they don’t completely pay off the amount they owe each month.

Debt consolidation loans, though, usually have significantly lower interest rates than credit cards. This means you’ll end up paying less money than if you had tried to pay off the debts separately. Depending on how much debt you have, you could end up saving hundreds, even thousands of dollars.

You won’t just save money over the life of the loan, though. You can potentially reduce your monthly payments by asking for a longer term on your debt consolidation loan. Keep in mind, though, that by extending the term of the loan, you will end up increasing the overall amount you pay.

A debt consolidation loan can also save you money by making it easier to keep track of how many payments you need to make each month. This dramatically lowers the risk of missing a bill and having to make a late credit card payment as a result. 

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Consolidate Your Debts at First Alliance Credit Union

If you have a lot of high-interest debt, a debt consolidation loan can be a lifesaver. By paying off your debts with a personal loan or home equity loan, you’ll save a lot of time by condensing all your credit card bills into one convenient payment. Even better, since the interest rate of your loan will most likely be lower than the rates of your credit cards, you’ll save some money as well.

You can get more information about debt consolidation loans and how they can help you by talking with a lending advisor at First Alliance Credit Union today. They’ll be able to help you figure out if a debt consolidation loan is your best option. If it is, they’ll be happy to guide you through the application process and show you how you can easily make payments on your loan through our online banking platform and mobile app.

We do our best to provide helpful information but we cannot guarantee the accuracy or completeness of the information presented in the article, under no circumstance does the information provided constitute legal advice. You are responsible for independently verifying the information if you intend to use it in any way. Additionally, the content is not intended to be reflective of First Alliance Credit Union’s products or services, for accurate and complete details about our product and service information you must speak to an advisor at First Alliance Credit Union.